TRIS Rating has assigned a “BBB+” rating to the proposed issue of up to Bt4,000 million in hybrid Tier-1 securities of TMB Bank PLC (TMB). At the same time, TRIS Rating has affirmed the company rating of TMB at “A+”and the rating of TMB’s subordinated debentures at “A” with “stable” outlook. The company and subordinated debenture ratings reflect TMB’s capable management team and ongoing support from its major shareholders. As a strategic partner, ING Bank N.V. actively manages TMB, and is expected to strengthen TMB’s financial and business profiles. TMB has leveraged ING Bank’s know-how in risk management and strengths in retail banking, insurance and asset management services, which are the keys to future growth. TMB also has strong cushion of capital funds and allowances for loan losses to absorb losses from the non-performing loan (NPL) reduction plan in 2009 and unexpected losses from future risks associated with adverse changes in the operating environment. However, these strengths are pressured by high legacy non-performing assets (NPA) and an unfavorable economic and business environment, which will limit business and profitability growth.
The “BBB+” rating for hybrid Tier-1 securities reflects both the subordination and payment deferral risks of the issue. The hybrid Tier-1 securities are perpetual, noncumulative, subordinated, unsecured, and callable by TMB after five years and every six months thereafter. The holders of hybrid Teir-1 securities will be subordinated to depositors and holders of senior debts and subordinated debts of the bank. The bank will not be obliged to make any payment in the event that the bank expects no net profit for the same six-month period during which any interest payment would be due or payable. Such non-payment will not constitute a default by the bank.
The “stable” outlook reflects the expectation of improvement in TMB’s asset quality, profitability and liquidity in the medium term. Support from ING Bank is expected to continuously enhance TMB’s risk management system and practices, franchise value and competitive edge, and to generate steady earnings in the medium term. However, the ability to achieve the three-year business plan under the new management team has yet to be proved.
TRIS Rating reported that as of December 2008, TMB was the sixth largest commercial bank in Thailand in terms of assets, with 7% market share in loans and 7% share in deposits. TMB’s major shareholders are ING Bank (which includes ING Support Holding) and the Ministry of Finance (MOF), which held 30.1% and 26.1% of the shares as of December 2008, respectively. TMB’s financial performance in 2008 improved substantially from 2007. The bank reported net profit of Bt424 million in 2008, a considerable reversal from a huge net loss of Bt43.67 billion in 2007. TMB’s ratio of NPLs to total loans also sustained at 16.3% in 2008, the same as in 2007. This level is far above the industry average of 6.9% for the 12 universal banks. However, NPAs (classified loans that are more than three months past due, plus the outstanding amount of troubled debt restructurings and foreclosed property) were 0.9 times its capital fund and allowance for loan loss, which was in line with the industry average of 0.8 times. This indicates strong cushion of capital fund and allowance for loan losses to absorb unexpected losses from future risks associated with adverse changes in operating environment. The bank plans to sell approximately Bt20 billion of NPAs within the first half of 2009, which will improve the bank’s overall asset quality.
The key management personnel, such as the chief of risk management (CRO) and the head of retail banking are nominated by ING Bank. The chief executive officer (CEO) has been jointly agreed by ING Bank and the MOF. The new CEO was appointed in July 2008, and all the key management personnel were on board in March 2009. The management team is well-recognized in the banking industry. All have extensive experience at the senior management level from large-sized commercial banks. The priorities for 2009 include the risk management improvement, human resource realignment, branch transformation and servicing channel expansion. The new management team will face challenges to improve asset quality and to grow the base of profitable assets amid unfavorable economic conditions, said TRIS Rating. — End
Company Rating: Affirmed at A+ Issue Ratings: TMB153A: Bt8,000 million subordinated debentures due 2015 Affirmed at A Up to Bt4,000 million hybrid Tier-1 securities BBB+ Rating Outlook: Stable Note: TMB owns 15.30% of TRIS Rating’s parent company, TRIS Corporation Ltd. (TRIS), which held a 99.99% stake in TRIS Rating.
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